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French economic recovery pushes through Omicron, supply issues
economy

French economic recovery pushes through Omicron, supply issues

10.02.2022 From our online archive
The euro area’s second largest economy has out-performed peers in Europe in recent months
The Paris business district, France
The Paris business district, France
Photo credit: Shutterstock

The French economy will keep growing in the first quarter of the year, shrugging off the disruption from a surge in Covid cases and a renewed intensification of supply difficulties, according to the Bank of France’s monthly report. 

Based on the responses from 8,500 companies, the central bank estimates economic activity at 1% above its pre-pandemic level in January and 1.5% in February. If the trend continues in March, growth for the first quarter would be around 0.5%. 

“The French recovery is solid and resisting omicron,” Bank of France Governor Francois Villeroy de Galhau said in an interview with the Le Monde newspaper. 

The euro area’s second largest economy has out-performed peers in Europe in recent months as the government imposed relatively minor restrictions to contain the spread of Covid and businesses continued to increase investment. 

The central bank is slightly more optimistic on growth than statistics agency Insee, which forecasts a 0.3% expansion in the first quarter. The current trend is consistent with the Bank of France’s prediction of 3.6% economic growth for the whole of 2022, Villeroy said. 

Still, there are headwinds in the short term from stronger-than-expected inflation and prolonged supply stress.

The share of industrial and building firms reporting output affected by difficulties sourcing supplies rose in January for the first time in four months. Around three quarters of business leaders expect the difficulties not to last more than a year, but only 10% in industry forecast an improvement within three months. 

The survey also showed raw material prices are stable at “very high” levels, while costs of finished goods are continuing to increase. The Bank of France said the pass-through of higher prices is still ongoing. 

©2022 Bloomberg L.P.


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